Taxation of Dividends
The dividends on both ordinary shares and preferred shares are paid net of taxes, i.e. with capital gains tax at 25% and the solidarity surcharge at 5.5% of the capital gains tax amount (total 26.375%), and also church tax where applicable, having already been deducted (withheld). Dividends are taxed in the case of residents of Germany in accordance with the provisions of German income tax law and German corporation tax law.
The tax withheld covers in full the German income tax payable on relevant private capital gains (and is hence known in German as “Abgeltungssteuer” or flat-rate tax). Irrespective of this, shareholders can apply to have the dividends included with all other capital gains made in the calendar year in their personal income tax declaration where this leads to a lower overall level of income tax payable (known in German as the “Günstigerprüfung” or more favorable tax treatment).
The circumstances of the individual shareholder (e.g. if in possession of a “Nicht-Veranlagungsbescheinigung” or non-assessment certificate) may allow application for repayment of the withheld capital gains tax and the solidarity surcharge.
In the case of shareholders resident outside Germany, the withheld capital gains tax and solidarity surcharge may be reduced, depending on the terms of any conventions for the avoidance of double taxation that exist between the Federal Republic of Germany and the country of residence concerned. Shareholders resident outside Germany are recommended to seek professional advice on the tax treatment of dividends.
If more detailed advice is required regarding the tax treatment of dividends in Germany, shareholders should obtain this individually from their local tax office (“Finanzamt”) or seek professional advice from a certified German tax consultant (“Steuerberater”).